Correlation Between Orient Pharma and Formosan Rubber

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Can any of the company-specific risk be diversified away by investing in both Orient Pharma and Formosan Rubber at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Orient Pharma and Formosan Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orient Pharma Co and Formosan Rubber Group, you can compare the effects of market volatilities on Orient Pharma and Formosan Rubber and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Orient Pharma with a short position of Formosan Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Pharma and Formosan Rubber.

Diversification Opportunities for Orient Pharma and Formosan Rubber

OrientFormosanDiversified AwayOrientFormosanDiversified Away100%
-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Orient and Formosan is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Orient Pharma Co and Formosan Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosan Rubber Group and Orient Pharma is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Orient Pharma Co are associated (or correlated) with Formosan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosan Rubber Group has no effect on the direction of Orient Pharma i.e., Orient Pharma and Formosan Rubber go up and down completely randomly.

Pair Corralation between Orient Pharma and Formosan Rubber

Assuming the 90 days trading horizon Orient Pharma Co is expected to generate 3.02 times more return on investment than Formosan Rubber. However, Orient Pharma is 3.02 times more volatile than Formosan Rubber Group. It trades about 0.03 of its potential returns per unit of risk. Formosan Rubber Group is currently generating about 0.02 per unit of risk. If you would invest  3,665  in Orient Pharma Co on October 26, 2024 and sell it today you would earn a total of  35.00  from holding Orient Pharma Co or generate 0.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Orient Pharma Co  vs.  Formosan Rubber Group

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 0102030405060
JavaScript chart by amCharts 3.21.154166 2107
       Timeline  
Orient Pharma 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Orient Pharma Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Orient Pharma showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan35404550
Formosan Rubber Group 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Formosan Rubber Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Formosan Rubber is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan25.225.425.625.82626.226.426.6

Orient Pharma and Formosan Rubber Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-14.47-10.83-7.2-3.570.03.777.6111.4415.28 0.20.40.60.81.01.2
JavaScript chart by amCharts 3.21.154166 2107
       Returns  

Pair Trading with Orient Pharma and Formosan Rubber

The main advantage of trading using opposite Orient Pharma and Formosan Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Pharma position performs unexpectedly, Formosan Rubber can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Formosan Rubber will offset losses from the drop in Formosan Rubber's long position.
The idea behind Orient Pharma Co and Formosan Rubber Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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